The U.S. Commerce Department reports that business spending on technology grew for the third straight quarter, in the third quarter of 2002, after five straight down quarters. The third quarter number for 2002 was 4.3 percent higher than the year-earlier figure, which was the first such year-over-year growth in almost two years. Worldwide, technology spending is forecast to rise almost 6 percent in 2003, according to IDC, a research firm in Framingham, Massachusetts.
What’s more, many technology companies have aggressively cut costs in the past two years so they have strong operating leverage now. That is, increases in revenues likely will go straight to the bottom line. If profits pick up, stock prices probably will head north.
Therefore, technology stocks may be ready to recover–but that doesn’t mean you should load up on this sector, as many investors did in the late 1990s. A 15 percent portfolio weighting in technology may be reasonable, considering tech’s place in the economy. According to Morningstar Inc., Chicago, the tech stocks most favored by growth fund managers are Microsoft, Intel, and Cisco Systems while value fund managers hold telecommunications companies Verizon and SBC.
